AIG dropped over 6% today following some very unpleasasnt disclosures about its muni outlook, and corporate liquidity implications arising therefrom: "American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity."

Everybody and their dog has known for a couple years that munis would get hammered. Everybody except the firm that holds 46.6b of them? No, ha. They know. They also know they'll get bailed out when it blows up. They'll keep their bonuses too.

I don't think it's quite right to think about these things as a stark choice between a purely private market and a market where the government in crisis or in normal times is guaranteeing mortgages. If you leave all these mortgages in the banking system, like many countries do, the government is still there with an implicit commitment to back the banking system. So if you look at the model that Canada, and many European counties, have adopted, where in contrast to our model, they leave most of these mortgages with banks. The government provides a lot of support for banks. It's very reluctant in those countries to let banks fail in a crisis. So the support is there, but it's just implicit -- it's not explicit. Banks don't have to pay for that support, but it's not quite the private market idea that many people think.

Why compare it to Canada or Europe? Why not China, Timmy?

Quote:

Geithner's explanation is quite astute, but it relies on a very important assumption: the U.S. would be forced to bail out the mortgage market again in the future, even if privatized. This may or may not be true, depending on whom you ask.

The Obama array of choices for housing reform is quite good. But Timmy is going to foreclose genuine discussion again. Remember, Timmy is the author of the HAMP monstrosity, which is merely an incentive plan full of carrots for loan servicers, disarmed of all the stick guarantees lawyers rely upon to defend foreclosure actions (including mild sticks like discovery permitting a peak at the mortgage servicers' Net Present Value test).

Now Timmy's message is, we'll be bailing out the banks each and every time. He wants this to be his legacy: privatized profit, socialized risk.

Last edited by Kuros on Tue Mar 01, 2011 12:55 pm; edited 1 time in total

So if you look at the model that Canada, and many European counties, have adopted, where in contrast to our model, they leave most of these mortgages with banks. The government provides a lot of support for banks. It's very reluctant in those countries to let banks fail in a crisis. So the support is there, but it's just implicit -- it's not explicit.

..and now a bungalow in Vancouver costs 2.7 million dollars. Though, that's really just the lot.

The level of fraud, from top to bottom, has been staggering. The lack of accountability and the complete disregard for the rule of law have made me and many of my colleagues extremely cynical and jaded when it comes to new evidence to pile on top of the mountain that we have already gathered. But we must not let our cynicism cloud our vision on the details within this new information.

We were finally granted the honor and privilege of finding out the specifics, a limited one-time Federal Reserve view, of a secret taxpayer funded “backdoor bailout” by a small group of unelected bankers. This data release reveals “emergency lending programs” that doled out $12.3 TRILLION in taxpayer money – $3.3 trillion in liquidity, $9 trillion in “other financial arrangements”...and Congress didn’t know any of the details.

If you still had any question as to whether or not the United States is now the world’s preeminent banana republic, the final verdict was just delivered and the decision was unanimous. The ayes have it.

Any fairytale notions that we are living in a nation built on the rule of law and of the global economy being based on free market principles has now been exposed as just that, a fairytale.

....the world's most incompetent ... regulator is preparing to let Dick Fuld completely off the hook for last spring's stunning Repo 105 report by Anton Valukas, whose findings even the bankruptcy expert said were probably cause for civil lawsuits.

The WSJ reports: "In recent months, Securities and Exchange Commission officials have grown increasingly doubtful they can prove that Lehman violated U.S. laws by using an accounting maneuver to move as much as $50 billion in assets off its balance sheet, which made it appear that the securities firm had reduced its debt levels....After zeroing in last summer on the battered real-estate portfolio and an accounting move known as Repo 105, SEC officials have grown more worried they could lose a court battle if they bring civil charges that allege Lehman investors were duped by company executives.

The key stumbling block: The accounting move, while controversial, isn't necessarily illegal." Oh no, illegal it is. The problem is that should the SEC actually pursue it and win, that act would open up the floodgates for hundreds of lawsuits against everyone from Bank of America and Citi, which have also disclosed they used comparable tactics to misrepresent the true status of their books, to shady accounts like Ernst & Young, all the way to FASB at the very top of the corruption pyramid. And with hundreds of millions if not billions in legal fees about to be paid out if the fraudclosure back door settlement fails, the SEC simply can not allow the pursuit of justice to threaten the viability of America's only national interest: that of its criminal banking syndicate.

The repo transactions were done to deliberately and materially misstate the financial statements. LB intentionally deceived investors and regulators. Period.

A key adviser to President Barack Obama on housing and mortgage policy is set to become the head of the Mortgage Bankers Association.
Barack Obama

Now I'm pretty cynical about politics. But this news made me stop and gasp.

David H. Stevens announced last week that he was leaving the Federal Housing Authority last week. At the time, he said he had no plans for his future employment. But, as it turns out, he's becoming a lobbyist.

The Washington Posts's Dina Elboghdady reports:

After joining FHA in July 2009, Stevens quickly emerged as a major player in crafting the Obama administration’s housing policy. He’s been deeply involved in several high-profile initiatives that involve the mortgage banking industry, including current negotiations that will determine what kinds of fines and penalties might be imposed on mortgage servicers who took part in shoddy mortgage foreclosure practices.

Stevens no doubt has had a hand in most of the Obama administration's housing and mortgage policies over the past year and half--almost of which have involved subsidies for housing and giveaways to banks.

"If Stevens had generally been less friendly to industry -- had he decided to let the mortgage market fall more freely or punish lenders more harshly (that is, had he been more Right or more Left) -- would industry have considered hiring him?" my brother Tim Carney asks at The Washington Examiner. "The incentives for powerful bureaucrats are to be 'responsible' and 'pragmatic' -- which usually means friendly to the industry you're regulating and subsidizing."

Tim goes on to point out some other top Obama officials cashing out to work for big banks:

* Deputy White House Chief of Staff Mona Sutphen, now a lobbyist for UBS.
* White House Counsel Greg Craig, who went to Goldman Sachs
* Budget Director Peter Orszag, who went to Citigroup
* Labor Department aide Oscar Ramirez who represents Bank of America at the Podesta Group
* Top Treasury Department aide Damon Munchus, who now lobbies for Citigroup and the International Swaps & Derivatives Association, among others.

This is a far cry from what some of us expected when candidate Obama pledged he was "closing the revolving door."

"No political appointees in an Obama Administration will be permitted to work on regulations or contracts directly and substantially related to their prior employer for two years," Obama wrote back during the 2008 campaign.

U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.

Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.

The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets.

Damn those conspiracy theorists who claim the existence of an international banking cabal.

If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?

I always thought the 'generals' in the Chicita Republic with their chest full of self-awarded medals and the funny hats had more principles than the current crop of American conservatives. (I should clarify: I don't consider 'me, me, me!' as a principle in the commonly understood meaning of the term.)

This is the work I do now. At Legal Aid's twice weekly foreclosure clinics, every clinic has someone bring in a complaint accompanied by a note that's improperly indorsed, or just plain absent. The legal work on the bank side is so shoddy. And then you have the magically appearing allonge.

The push in the legal field here is to move foreclosure hearings into equitable grounds. But remember that judges don't like this stuff to be complicated. This is supposed to be the easiest part of their docket. Foreclosures have always dominated lawsuits, in terms of pure numbers. Imagine from the judges' perspective what happens if they take each foreclosure seriously.